Gift certificates otherwise referred to as gift voucher or more popularly gift cards, preloaded debit stored-value money card often employed as cash alternative by online retailers is suddenly the target of online fraudsters and scammers. Jeff Blyskal award winning investigative reporter, alerts buyers on dangers associated with gift cards. 

This piece was culled from the consumer reports website.

Gift cards are hotter than roasted chestnuts this yule season. According to a National Retail Federation survey of 7,200 consumers, 56 percent of respondents have gift cards on their Christmas shopping list. Retailers expect to sell more than $27 billion worth of these cards during the holiday season because for many people, they take the agony out of finding that perfect present.

But if you’re buying gift cards this year, there is a scam that you should know about. That gift card you’re eyeing—perhaps from one of your favorite retailers—might have been compromised.

How the (gift card scam) Scam Works

The process of stealing the money off gift cards is fairly complex. A hacker takes the card off the rack, writes down the gift card’s number, and scratches off the strip on the back of the card to get the security code.

Once he has that information, he puts a replacement strip—easily available online—over the code and leaves the store.

Later, after you buy the card and load money onto it, the hacker gets an alert that tells him that the funds have been loaded onto the card.

“The crooks can see as soon as someone activates the card, because they’ve automated all this with software that periodically checks the card balance via the internet,” says David Farquhar, unit chief in the FBI’s Criminal Investigative Division.

Because gift cards generally can’t be redeemed for cash, the crook then starts a roundabout process of laundering the money.

For example, he might place an ad on a site such as eBay for an item that he doesn’t actually own, say, a new Xbox video game console that sells for $600 in a retail store but that he is selling for $500. When a buyer quickly snaps up that deal, the buyer sends his money to the crook.

The crook, meanwhile, uses the money loaded onto the stolen gift card to purchase the console from, say, Amazon, which ships the game player right to the buyer.

“Gift cards are a big target for criminals,” says Avivah Litan, security analyst for Gartner, an information technology research and advisory firm. Though the FBI estimates that gift card fraud losses are in the low single digits as a percentage of sales, about $130 billion in gift card sales were made in 2015, according to CEB, a research advisory firm. Even 1 percent of that would equal $1.3 billion last year in fraud.

Protect Yourself

When shopping for a gift card, consider taking these steps:

Buy gift cards online directly from the retailer, chain restaurant, or other issuer, says the FBI’s Farquhar. Criminals don’t have easy access to those cards. Buy online especially if you’re purchasing a high-value gift card.

Don’t buy in-store racked cards with easily accessible numbers and PINs. If you buy in a retail store, look for gift cards kept behind the counter or in well-sealed packaging, such as those from American Express, Mastercard, and Visa. Inspect the package for tampering, advises Timm Walsh, board chair of the Retail Gift Card Association.

If possible, change the security code as soon as you buy the card. Register the card when you get home, change the PIN, and educate the recipient about what you did and why he or she should not delay in using the card.

Secure your home computer. Farquhar says criminals also gain access to your gift card numbers and PINs by hacking your computer. To help prevent that, make sure your security software is the most up-to-date version, create and use strong passwords or a password generator, and follow our 66 ways to protect your privacy.

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Jeff Byskal

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PM Browne is chief executive, SNT. Before now Browne worked previously in such key marketing areas as advertising, order fulfillment officer for an online retail giant before setting out to develop Shopping News Today to cater for the online e-commerce information sector
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